Silly comparison

Danyl at looks at the share price of Fletchers over the last month after 10 days ago announced an inquiry into the cost of building materials. As the price has dropped Danyl says:

According to the Steven Joyce/Fran O’Sullivan theory of political sharemarket vandalism, Nick Smith has ‘destroyed’ about $260 million dollars worth of wealth in the last ten days. I look forward to their columns/press releases warning of capital flight, skies raining blood etc.

This is one of Danyl’s more silly comparisons. In his world I guess there are no shades of grey. An inquiry into high prices is the same as a unilateral announcement with no consultation that the Government is going to dismantle the competitive market and set prices.

Let’s look at what Nick Smith actually said:

Housing Minister, Nick Smith, speaking on “The Nation” said there was significant concern that items “the likes Batts, likes of Gib and concrete” were more expensive than what they were in Australia.

Batts and Gib are Fletcher’s brands and the company is a major concrete supplier.

But Mr Smith denied the Government was singling Fletcher’s out.

“We need in a very thorough way not on the basis of rumour or speculation, on the basis of really good analysis and information, to have a hard look at how the building materials’ market is working and to ensure that there are the competitive pressures that are there,” 

“In terms of tariffs and those things, you know New Zealand has a pretty liberal regime for bringing products in, but are there other barriers? 

For instance, we have a Body Standards New Zealand that sets the standard, and sometimes I’m concerned that the industry groups have too much influence over those standards, that are then effectively adopted by councils and do not allow product from overseas to be able to give Kiwis real choice about those products.”

Mr Smith said his inquiry was going to look what regulatory tools that the government had at its fingertips, that could try and get building materials costs more reasonable for the industry. 

So no mention or even hint of price controls. In fact the announcement seems focused on increasing competition in the market, and reducing regulatory costs. And also note that these products are just a few of many produced by Fletchers.

This is hardly in the same universe as what Greens and Labour did with Contact Energy and the 13 other generators. They have been attacking Contact for a couple of years, claiming (falsely) their prices are higher than the SOEs. Contact has only one product – electricity, and their announcement was that if elected they will unilaterallly determine the price Contact can sell electricity at in the future. This is the Government deciding the price for the sole product Contact produces. It is not about increasing competition, but removing it all together. It is in fact a de facto as if the Government gets to set the price you charge for your sole product, they effectively own your company.

So as I say, the comparison is beyond silly.

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